Businesses urged to check on LIBOR exposure before the rate change at the end of 2021
1200 businesses were asked if they had a LIBOR linked financial product and were aware of the fact LIBOR is being phased out.
- 25% of the financial decision makers questioned were unsure if they have a product linked to LIBOR
- 48% of the businesses who had heard of LIBOR didn’t know it was coming to an end (includes businesses who don’t have a LIBOR product)
- Of the businesses who know they have a LIBOR linked product, 82% feel very or fairly confident they will be ready for the LIBOR transition on 31 December.
- New UK Finance SME LIBOR Transition Resource launched to help businesses prepare
Ahead of the phasing out of LIBOR at the end of December 2021, a new survey has found that a quarter of businesses (25%) are unsure if they have a loan or contract linked to LIBOR that could be affected by the change.
LIBOR is currently the most common interest rate benchmark in the UK. The transition therefore impacts any UK business with a product linked to LIBOR that continues after 2021 and could include commercial loans, leasing and servicing contracts and company pension schemes.
The survey of 1200 businesses, conducted by UK Finance, found that most of the businesses unaware of their potential LIBOR exposure were SMEs*.
To help SMEs understand the transition, the robust alternative rates, and the way any new calculation could be made, UK Finance has launched a new LIBOR Transition Resource on its website which answers key questions, signposts businesses to all the information available to help, and urges impacted firms to act now.
The survey also highlighted that just under half (48%) of the businesses who had heard of LIBOR didn’t know it was coming to an end – this figure included businesses who don’t have a LIBOR product and would therefore not need to be engaged with the transition process.
Despite the lack of awareness of the issue among some businesses, the survey found that for businesses who knew they have a LIBOR linked product, 82% felt very or fairly confident they will be ready for the transition on 31 December.
Daniel Cichocki, LIBOR transition director, at UK Finance said: “Whilst this transition to alternative rates does not affect all businesses, it will impact a significant number given how widely LIBOR is used.
“Our survey showed that whilst a number of businesses are not yet aware of this issue, confidence among those who are engaged in the process is high. Banks and lenders will be increasing communication with impacted customers in the coming weeks and months to engage further on the transition and any action needed.
“We are urging any business who has a financial product that could be affected to check for LIBOR exposure, review the impact this might have, make a plan, and speak to their bank, lender or adviser if they have any questions.
“Our new resource aims to support businesses through this period and ensure they are not caught out by the change. With less than six months to go, the time to act is now.”
*Businesses with less than 250 employees